MASTER MINDS
No.1 for CA/CWA & MEC/CEC
4.INCOME FROM HOUSE PROPERTY
N-10
M11
TO
N11
M-12
N12
TO
M13
N-13
M-14
N-14
M-15
N-15
M-16
N-16
M-17
N-17
CONCEPT WISE ANALYSIS OF PREVIOUS EXAMINATIONS OF IPCC (THEORY)
1.
CHARGING SECTION – 22
C
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2.
EXCEPTIONS TO SEC.22
A
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3.
DEEMED OWNER
A
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4.
CALCULATION OF GAV & NAV
A
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8
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5.
DEDUCTION OF MUNICIPALITY
TAXES
A
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6.
TYPES OF HOUSE PROPETIES
A
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7.
SELF OCCUPIED PROPERTY
A
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8.
LET OUT PROPERTY
A
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9.
DEEMED LET OUT PROPERTY
A
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NEITHER SELF OCCUPIED
10. PROPERTY NOR LET OUT
PROPERTY OR UNOCCUPIED
B
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A
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12. TDS SEC – 25
C
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13. RECOVERY OF UOREALISED RENT
C
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4
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14. ARREARS OF RENT RECEIVED
C
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15. DEDUCTIONS U/S – 24
A
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16. CO-OWNERSHIP SEC – 26
B
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No.
11.
Chapter / Concept Name
PARTLY SELF OCCUPIED PROPERTY
& PARTLY LET OUT PROPERTY
M09
ABC TO
M10
M-09
N-09
M10
TO
N12
M-13
N-13
M-14
N-14
M-15
N-15
M-16
N-16
M-17
N-17
CONCEPT WISE ANALYSIS OF PREVIOUS EXAMINATIONS OF IPCC (PROBLEMS)
1.
DEEMED OWNER
A
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2.
DEDUCTIONS UNDER SECTION-24
A
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4
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3.
CALUCULATION OF GAV & NAV
A
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4.
SELF OCCUPIED PROPERTY (SOP)
A
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5
5.
LET OUT PROPERTY (LOP)
A
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4
8
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6.
DEEMED LET OUT PROPERTY (DLOP)
A
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7.
NEITHER SELF OCCUPIED PROPERTY OR
LET OUT PROPERTY OR UNOCCUPIED
B
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8.
PARTLY SELF OCCUPIED PROPERTY &
PARTLY LET OUT PROPERTY
A
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8
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9.
CO-OWNERSHIP
B
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6
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10.
CALUCULATION OF PCPI&CURRENT YEAR
INTEREST
B
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8
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No.
Chapter/Concept Name
ABC
SEC.’S TO BE REMEMBERED:
Sec.24
Deductions (Int., Repairs)
Sec.27
Deemed Owner
AMENDMENTS IN THE FINANCE ACT, 2017 – Sec-23(5)
CA Inter_39e_ Income Tax_Income from House Property ______________4.1
Ph: 98851 25025/26
www.mastermindsindia.com
1. CHARGING SEC.22
The annual value of any property comprising of building or land appurtenant thereto(Attached
to building)for which the assessee is the owner (Owner may be any person, whether an
individual, HUF, firm, or company), is chargeable to tax under the head Income from House
Property.
If the following three conditions are satisfied, Sec 22 is applicable:
1. There should be a building or land attached to the building.
2. Assessee should be the owner of the Building.
3. Building should not be used for own business or Profession.
For example: X owns a building. It is given on rent. Income of the property is taxable under
“Income from house property”.
Analysis:
1) Building:
a) Section 22 is not confined only to the house property, but extended to all buildings
whether used as dwelling house or for any other purposes.
b) The manner in which the building is used by the assessee is not relevant.
c) Building may take any form E.g., Cinema hall, an auditorium
d) Land Appurtenant there to a building consists of such portions of land that are taken to
be part and parcel of the building in order to enable the enjoyment of the possession of
such building. Therefore garden attached to the building, approaches road etc. forms
part of the building. Hence its rental income will be taxable under income from house
property.
e) If a land is nowhere connected with the building, it would be taxable under the head
PGBP or IOS as the case may be.
Note:
(i) Residential Building – 4 walls having a roof
(ii) Commercial Building – with or without roof
Examples:
Example
cinema hall
hut
stadium
godown
residential house
incomplete house
ruined house
Answer
house
house (reason: mud wall is sufficient wall)
house (reason: roof is not necessary for commercial house)
house
house
not a house
not a house
Tit Bit 1: State whether vacant site lease rent is taxable under the head Income from
House Property? (IOS)
2) Ownership:
a) Owner is the person who is entitled to receive income from the property in his own
right.
b) The requirement of registration of the sale deed is not warranted.
c) Ownership includes both free-hold and lease-hold rights.
d) The person who owns the building need not also be the owner of the land upon which
it stands.
e) The assessee must be the owner of the house property during the previous year. It is
not material whether he is the owner in the assessment year.
CA Inter_39e_ Income Tax_Income from House Property ______________4.2
No.1 for CA/CWA & MEC/CEC
MASTER MINDS
f) If the title of the ownership of the property is under dispute in a court of law, the
decision as to who will be the owner chargeable to income-tax under section 22 will be
of the Income-tax Department till the court gives its decision to the suit filed in respect
of such property.
EXCEPTIONS TO THE ABOVE RULE: (Deemed owner)
i)
Individual, who transfers otherwise than for adequate consideration, any house
property –
 To his or her spouse, not being a transfer in connection with an agreement to live
apart or
 To a minor child not being a married daughter.
Note:
a) The property being transferred must be a house property.
b) Marriage must subsist as on the day of transfer of property as well as on the day of
accrual of income.
c) If the property is transferred for adequate consideration, then Sec.27 is not
applicable.
Examples:

Mr. A transferred his house property to his spouse worth Rs.20 lakhs out of love
and affection. But after few days of transferring property they got divorced. In such
a case, property shall be taxed in the hands of Mr.A before the Divorce and after
that it shall be taxed in the hands of his spouse.

Mr. P gave Rs.10 lakhs in cash to his spouse on their anniversary and she
purchased a house property from the given cash. Then such transfer of cash and
the subsequent purchase of house property shall not be covered by the provisions
of Sec.27. But the income from such property shall get clubbed in the hands of
Mr.P as per the provisions of Sec.64(1)(iv).
ii) Holder of an impartible estate: A person who claims or exercises the managing
rights over such property shall be deemed to be the owner and any income arises out
of such property shall be taxed in his/her hands.
E.g.: X is one of the Ex-Rulers. He has divided all his properties amongst his three
sons. However, he could not transfer a building, which is occupied by a temple and
which is given, as per family convention, to his eldest son (all the three brothers along
with other family members have right to enjoy the benefit of the property; the eldest
son holds the property as a trustee). The eldest son, as holder of “impartible estate”, is
deemed as owner of the property.
iii) Members of a co-operative society, company or other AOP to whom a building or a
part thereof, is allotted or leased under a house building scheme.(**)
Even though the ownership is with the society, still such rental income can be taxed in
the hands of the member, to whom it was allotted.
A person acquiring any rights of a building, in relation to part performance of a
contract, under Sec. 53A of the Transfer of Property Act.
iv) A person who acquires any right in respect of any building, by way of lease for atleast 12 years shall be deemed to be the owner of that building. (This does not cover
any right by way of a lease from month to month or for a period not exceeding 1 year).
Example: A transferred his property to B, under a lease agreement for a period of 8
years together with renewal right for a further period of 4 years. Hence, in such a case
B shall be treated as the Deemed owner for the purpose of Sec.27. However, if such
right of renewal is for a further period of 2 years, then A shall be the owner and liable to
tax u/s.22.
** Section 53A of the Transfer of Property Act requires the following conditions:
a) There is an agreement in writing between purchaser and seller.
CA Inter_39e_ Income Tax_Income from House Property ______________4.3
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b) The purchaser has paid the consideration or he is ready to pay the consideration.
c) The purchaser has taken the possession of the property.
E.g.: X enters into a written agreement to purchase a property from Y for Rs.25,00,000. He
has paid the consideration and taken possession of property. The sale deed is yet to be
registered. He becomes deemed owner for the purpose of paying tax on rental income
although he is not the registered owner of the property.
Tit Bit 2
Legal Ownership itself is the criteria for assessment under the head income from house
property. (True/False) – False
3) Building should not be used for own business or Profession
Property held as stock-in-trade etc. Annual value of house property will be charged under
the head “Income from house property” in the following cases also –
a) Where it is held by the assessee as stock-in-trade of a business;
b) Where the assessee is engaged in the business of letting out of property on rent.
4) House property held as stock-in-trade [Section 23(5)]:
a) In some cases, property consisting of any building or land appurtenant thereto may be
held as stock-in-trade, and the whole or any part of the property may not be let out
during the whole or any part of the previous year.
b) In such cases, the annual value of such property or part of the property shall be NIL.
c) This benefit would be available for the period up to one year from the end of the
financial year in which certificate of completion of construction of the property is
obtained from the competent authority.
2. EXCEPTIONS TO SEC.22
THE INCOME FROM BELOW PROPERTIES IS NOT CHARGEABLE TO TAX/ TAXABLE
UNDER SOME OTHER HEADS:
1. Building used for assessee’s own business / profession.
2. Where letting out is incidental to the business: For example - If the assessee makes
available to the Government its accommodation for locating a branch of bank, post office,
police station, central excise office, staff quarters etc. for carrying on its business efficiently
and smoothly, rent collected, being incidental to the assessee’s business, is not taxable as
“Income from house property” but taxable as business income.
3. Cases where income from house property is exempt from tax.
No.
Section
Particulars
1.
10(1)
Income from any farm house forming part of agricultural income.
2.
10(19A)
Annual value of any one palace in the occupation of an ex-ruler.
3.
10(20)
Income from house property of a local authority.
4.
10(21)
Income from house property of an approved scientific research
association.
5.
10(23C)
6.
10(24)
7.
11
8.
13A
9.
22
10.
23(2)
Property income of universities, educational institutions, etc.
Property income of any registered trade union.
Income from house property held for charitable or religious purpose.
Property income of any political party.
Property used for own business or profession
One self-occupied property of an individual/HUF
(Teach problem No.1 of classroom discussion)
CA Inter_39e_ Income Tax_Income from House Property ______________4.4
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
Tit Bit 3: X let out his property to Y. Y sublets it. How is sub-letting receipt to be assessed in
the hands of Y?
Tit Bit 4: Y has built a house on a leasehold land. He has let out the property and claims that
the income there from is chargeable under the head “Income from other sources”. He has
deducted expenses on repairs, security charges, insurance and collection charges in all
amounting to 40% of receipts. Is Mr. Y’s claim valid?
Tit Bit 5: Z uses his property for his own business. Would the annual value be subject to tax
under the head “Income from house property”?
3. COMPUTATION OF GROSS & NET ANNUAL VALUE
COMPUTATION OF GROSS ANNUAL VALUE (GAV): The gross annual value of a house
property will be calculated as per the following three steps –
Step1: Expected Rent (ER) [Sec. 23(1)(a)]:
Note:

Compare Fair Rent and Municipal Valuation and select the Higher.

Compare the rent so selected with the standard rent and the lower of the two shall be
considered to be Expected rent. (It is also called as Annual Letting Value)
a) Even if the property is vacant for a part of year, M.V/F.R is to be computed for full year.
b) Where the house property came into existence only during the previous year, the annual
value shall be computed only for the period for which the house was existed.
Some Glossary:M.V – Municipal Value is the Value assessed by the local municipal authorities for property
taxes computation.
F.R – Fair Rent is the rent fetched by a similar property in the same locality or any other
locality with same facilities.
S.R – Standard Rent is the maximum rent that can be recovered from the tenant under the
Rent Control Act.
Tit Bit 6: Find out Expected Rent for the following:
Particulars
M.V
F.R
S.R
Ans
Case 1
45
36
NA
Case 2
60
55
53
Case 3
75
70
94
Case 4
88
93
96
Case 5
52
64
44
Case 6
40
30
29
Step2: If Actual Rent Received or Receivable (ARR) exceeds Expected Rent (ER) [Sec.
23(1)(b)]:
Compare Expected rent with Rent received or Receivable and the Higher shall be considered
to be Gross Annual Value
Notes:
1. This step is applicable only when the property or any of its part has been let out during any
part of the previous year.
2. Actual rent receivable/received (ARR):
Actual Rent = Rent Receivable – Unrealised Rent
3. Unrealised Rent:
Unrealised rent refers to the rent payable but not paid by the tenant and which the
is also not able to realize from the tenant.
owner
CA Inter_39e_ Income Tax_Income from House Property ______________4.5
Ph: 98851 25025/26
www.mastermindsindia.com
As per Rule 4 the unrealised rent can be reduced from the actual rent if: (M12 - 4M)
a) The tenancy is bona fide;
b) The defaulting tenant has vacated or steps for the same are taken;
c) He is not in occupation of assessee’s any other property; and
d) The assessee has taken steps for the recovery of the unpaid rent.
Step3: Actual rent received/receivable (ARR) is less than Expected Rent (ER) [Sec.
23(1)(c)]:
Gross Annual Value (GAV) = Actual Rent Received/Receivable.
(a) The above Clause shall apply only when the actual rent received or receivable is less than
the Expected rent due to vacancy but not for any other reason.
(b) If property is ready to be let, but could not actually be let throughout the previous year, this
clause is applicable and GAV in such a case is NIL.
Illustration 1: Computation of Gross Annual Value: Determine Gross Annual Value in
following casesParticulars
Fair Rent (FR)
Municipal Value (MV)
Standard Rent (SR)
House Rentals (P.m.)
Let out period (in months)
Unrealised Rent (Rule 4)
House 1
(Rs.)
House 2
(Rs.)
House 3
(Rs.)
House 4
(Rs.)
House 5
(Rs.)
1,00,000
2,00,000
1,50,000
20,000
12
NIL
1,50,000
3,00,000
4,00,000
30,000
5
NIL
4,00,000
5,04,000
50,000
6
54,000
6,00,000
3,00,000
2.00,000
15,000
7
NIL
4,00,000
6,00,000
60,000
10
90,000
Solution: Computation of Gross Annual Value
Particulars
Actual Rent Received/Receivable
(ARR)[Actual Rent – Unrealised
Rent]
Step I: Expected Rent = Higher of
FR or MV subject to maximum of
SR
Step II: If ARR exceeds ER, GAV
= ARR
Step III: If ARR is less than ER
due to vacancy, GAV = ARR
(See Note below)
Gross Annual Value
House 1
House 2
House 3
House 4
House 5
2,40,000
1,50,000
2,46,000
1,05,000
5,10,000
1,50,000
3,00,000
5,04,000
2,00,000
6,00,000
2,40,000
NA
NA
NA
NA
NA
1,50,000
2,46,000
NA
510,000
2,40,000
1,50,000
2,46,000
2,00,000
5,10,000
Note: Test for applicability of Sec.23(1)(c):
Particulars
Actual Rent Received / Receivable (ARR)
Add: Rent for vacancy period
ARR (If there is no Vacancy)
Expected Rent
If ARR (if there is no Vacancy) exceeds
ER, then ARR is less than ER due to
vacancy.
Otherwise ARR is less than ER not
due to vacancy
House 2
1,50,000
2,10,000
(7x30,000)
3,60,000
3,00,000
Due to
vacancy
House 3
House 4
House 5
2,46,000
1,05,000
5,10,000
3,00,000
75,000
1,20,000
(6x50,000) (5x15,000) (2x60,000)
5,46,000
1,80,000
6,30,000
5,04,0000
2,00,000
6,00,000
Due to
vacancy
Not due to
vacancy
Due to
vacancy
CA Inter_39e_ Income Tax_Income from House Property ______________4.6
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
4. COMPUTATION OF NAV
1. Deduction is given in respect of Municipal taxes (Like property taxes, water taxes etc.)
subject to the following 2conditions:
a) It should be borne by the assessee&
b) It should be actually paid during the previous year (i.e. allowed on cash basis).
Tit Bit 7
Ram owned a house property at Chennai which was occupied by him for the purpose of
his residence. The corporation tax payable in respect of PY’s 2016-17, 2017-18, 2018-19
amounts to Rs.3000, Rs.2000 and Rs.5000 respectively. In respect of the PY 2017-18
Corporation taxes was Rs.2,000 of which 50% was paid by him before 31.3.2018. Explain
the treatment of the Corporation Tax?
2. If property taxes for a particular previous year are not paid during that year, no deduction
shall be allowed for that year. However, if in a later year if they are paid, then it shall be
allowed as deduction for that later year i.e. municipal taxes, etc paid during the previous
year are allowable even if they relate to past years or future years.
3. In case municipal taxes paid are more than GAV, NAV, could be negative.
NAV = GAV - Municipal Taxes paid
4. Even where the property is situated outside the country, taxes levied by local
authority in that country are deductible.
Illustration 2: Rajesh, a British national, is a resident and ordinarily resident in India
during the P.Y.2017-18. He owns a house in London, which he has let out at £ 10,000 p.m.
The municipal taxes paid to the Municipal Corporation of London are £ 8,000 during the
P.Y.2017-18. the value of one £ in Indian rupee to be taken at Rs.82.50.Compute Rajesh’s
taxable income for the A.Y. 2018-19.
(SM)
Solution:
Computation of Income from house property of Mr. Rajesh for A.Y.2018-19
Particulars
Gross Annual Value (£ 10,000 × 12 × 82.50)
Less: Municipal taxes paid (£ 8,000 × 82.50)
Net Annual Value (NAV)
Less: Deduction under section 24
(a) 30% of NAV = 30% of Rs. 92,40,000
Income from house property
Rs
99,00,000
6,60,000
92,40,000
27,72,000
64,68,000
5. DEDUCTIONS U/S 24
Only 2 deductions (as given in Sec.24) are available in computation of income under this head.
Therefore no deduction can be claimed in respect of expenses which are not specified in Sec.24.
1. Repairs & Collection Charges: [Sec. 24(a)]
a) 30% of NAV is allowed as deduction to cover repairs and collection charges,
irrespective of the actual expenditure spend by the assessee.
b) This deduction is allowed even if no expenditure is incurred by the assessee.
c) Assessee can avail this deduction even if tenant undertakes to do the repairs.
2. Interest on Loans:[Sec. 24(b)]
a) This deduction is available on “accrual” basis.
b) Purpose of borrowing:
Interest payable on loan borrowed for the purpose of
CA Inter_39e_ Income Tax_Income from House Property ______________4.7
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i)
www.mastermindsindia.com
Purchase,
ii) Construction,
iii) Renovation,
iv) Repairing and
v) Reconstruction can be claimed as deduction.
c) Deduction for interest is given in two parts -Current year interest & Pre - Construction
period interest.
Pre-construction period interest
i)
Pre-construction period shall starts from the date of borrowing and shall end on 31st
march of the year preceding to the year in which the building comes into existence.
However if the loan is repaid before the Building comes into existence, then pre
construction period shall end on the date of repayment of loan.
ii) The deduction of pre-construction period interest is allowed in 5 Equal Installments
from the previous year in which Building comes into existence.
iii) If the Building comes into existence in the year of availing the loan, then there is no
pre construction period interest.
Post- Construction period interest
i)
The post construction period always starts from the previous year in which building
comes into existence. Where the loan is repaid before the building comes into
existence, post construction period does not exist.
ii) The deduction is allowed every financial year from the year the building comes into
existence.
iii) Interest related to year of completion of construction can be fully claimed
irrespective of completion date.
Tit Bit 8: Mr. Kalpesh borrowed a sum of Rs.30 lakhs from the National Housing Bank
towards purchase of a residential flat. The loan amount was disbursed directly to the flat
promoter by the bank. Though the construction was completed in May, 2018, repayments
towards principal and interest had been made during the year ended 31.3.2018.In the light of
the above facts, state Whether Mr. Kalpesh can claim deduction under Section 24 in respect
of interest for the assessment year 2018-19?
(Ans.:-NO)
Illustration 3: The assessee took a loan of Rs.1,00,000 on 1-4-15 from a bank for construction
of a house on a piece of land he owns in Delhi. The loan carries an interest @ 20% per annum.
The construction is completed in 15-06-17. The entire loan is still outstanding as on 31.3.2018.
Compute the interest allowable for the A.Y. 2018-19.
Solution: Interest for the year (1.4.2017 to 31.3.2018) = 20% of Rs.1,00,000 = Rs. 20,000
Pre-construction interest is 20% of Rs.1,00,000 for 2 years (from 1.4.2015 to
31.3.2017)amounts to Rs.40,000.Pre-construction interest to be allowed in 5 equal annual
installments of Rs.8,000 from the year of completion of construction i.e. in this case, P.Y.201718.Therefore, total interest deduction under section 24 is Rs. 28,000 (Rs.20,000+Rs.8000).
1. LIMITS APPLICABLE IN RESPECT OF DEDUCTION - SELF OCCUPIED/UNOCCUPIED
PROPERTIES:
Where the property has been acquired, constructed, repaired,
renewed or reconstructed with borrowed capital before
01.04.1999
Where the property is acquired or constructed with capital
borrowed on or after 01.04.1999 and such acquisition or
construction is completed within 5 years from the end of the
financial year in which the capital was borrowed.
Actual Interest payable
subject to maximum of
Rs.30,000.
Actual interest payable
subject to maximum of
Rs.2,00,000**.
CA Inter_39e_ Income Tax_Income from House Property ______________4.8
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
Where the property is repaired, renewed or reconstructed with Actual interest payable
capital borrowed on or after 01.04.1999
subject to a maximum of
Rs.30,000.
**The assessee shall obtain a certificate from the lender that the Loan amount has been
utilized for the specified purpose (as mentioned in the Loan Agreement)
2. Limits NOT applicable for Let out property/ Deemed let out property: Any amount of
interest is allowable as deduction in respect of such house properties.
3. If a fresh loan has been raised to repay the original loan, the interest payable in respect of
the second loan would also be admissible.
4. Interest on interest is not deductible. Any interest paid on outstanding amount of interest,
will not be allowed as deduction.(Generally Penal Interest)
5. This deduction is subject to Sec.25 in some cases.
6. No deduction is allowed for any brokerage or commission for arranging the loan.
7. Interest includes commitment charges [CC].
8. For principle repayment of loan, deduction U/S 80C is available.
a) This deduction is available on payment basis only
b) This deduction is available only if construction of property was completed and income
of that property is chargeable under I.F.H.P. (to be Discussed at Chapter VIAdeductions)
Tit bit 9
Purpose of loan
Date of borrowing
Date of completion
Situation 1
Interest on borrowed capital
Situation 2
Interest on borrowed capital
Situation 3
Interest on borrowed capital
Situation 4
Interest on borrowed capital
Loan 1
Construction
01.06.2014
09.01.2017
Nil
2,30,000
70,000
2,05,000
Loan 2
Renovation /
Repairs
01.06.2014
NA
40,000
Nil
35,000
45,000
(Ans.: 30,000; 2,00,000; 1,00,000; 2,00,000.)
Issue: Mr. A purchases a house property from Mr. B for Rs. 10,00,000. Mr. A has paid only 50
% of the purchase price to Mr. B. Mr. B agreed for treating the balance purchase price as loan
to Mr. A. Can Mr. A claim the interest paid to B as deduction?
Solution: Yes, he can claim and it qualifies for deduction in the computation of Income from
such property. [CIT Vs. R.P. GOENKA & J.P. GOENKA]
Note:______________________________________________________________________
___________________________________________________________________________
6. ANNUAL VALUE OF A SELF-OCCUPIED HOUSE PROPERTY [Section 23(2) To 23(4)]
a) SELF - OCCUPIED PROPERTY [SEC. 23(2)]: IN THE FOLLOWING CASES, THE NET
ANNUAL VALUE IS TAKEN TO BE NIL –
i)
Where the property is self-occupied; or
ii) Such property cannot be self-occupied because of assessee’s business or profession
or employment, he stays in another place in a rented premises.
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Important points:

Since in these cases annual value of the property is taken to be NIL, the municipal
taxes paid by the owner of the house need not be considered.

Exemption of self-occupied is available only if the house property is occupied by the
owner himself for the purposes of his residence.
If the house property is occupied by relatives of owner for the purposes of their
residence, benefit of self-occupation will not be available.

Similarly, where the assessee let out his house to his employer and the employer
allotted the house to the assessee as rent-free quarters, the benefit of allowance for
self-occupation u/s 23(2) would not be available to the assessee.
b) Withdrawal of Exemption of Self-Occupied [Section 23(3)]: The exemption under
section 23(2) in case of self-occupied property shall not apply if,i)
Such house or part thereof is actually let during the whole or any part of the previous year; or
ii) Any other benefit there from is derived by the owner
If exemption doesn’t apply: When exemption of self-occupied doesn’t apply then, the
annual value of house property is to be computed as per Section 23(1), as if the property
is not self-occupied.
c) Two or more Self-Occupied Houses [Section 23(4)]: Where the self occupied house
property referred to under section 23(2) consists of more than one house, then, i)
Any one to be treated as self occupied: Annual Value (NAV) of any one such house as
specified by the assessee shall be taken to be NIL. This option may be changed from
year to year.
ii) Others to be treated as deemed let out: The annual value of the other house(s) shall
be determined as per Section 23(1) as if such house(s) had been let out.
Note:______________________________________________________________________
___________________________________________________________________________
7. TYPES OF HOUSE PROPERTIES
I.
SELF OCCUPIED PROPERTY (In brief):***
Particulars
Amount
Net Annual Value
Nil
Less: Interest on borrowed capital u/s.24(b)
XXX
(To the maximum of Rs.30000 or Rs.200000 as the case may be)
Income from house property
(XXX)
Note: Standard deduction u/s.24(a) shall always be Nil, hence need not to be mentioned.
(Teach Problem No.2, 3 of classroom discussion.)
II. LET OUT PROPERTY - SEC.23(1):
Format to determine taxable Income from let out property:
Net Annual Value
XXX (Gross annual value – Municipal taxes paid)
(-) Deductions U/s. 24
XXX
Income from House Property XXX
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III. DEEMED LET OUT PROPERTY: Where the assessee owns more than one house property for his
self-residence for whole year and he derives no other benefit from such property, then one
house property according to his choice, is treated as SOP for residence and the remaining
property is treated as deemed to be let out property whose GAV is taken as expected rent.
i)
Generally the property, whose expected rent is maximum, will be taken as SOP for
residence. However choice should be such that tax liability comes out to be minimum.
ii) Where the assessee owns more than one house property and uses one of the house
properties for his self-residence for whole year and the other house properties are
used by his/ her family members, then the house property used by the assessee, is
treated as SOP for residence and the remaining properties is treated as deemed to be
let out properties whose GAV is taken as expected rent.
iii) All deductions permissible to a let-out property would be allowable in case of a
“deemed to be let out” property.
Procedure for computation: This is similar to LOP but subject to certain modifications:
a) Fair rent has to be adopted as gross annual value. However if standard rent is fixed for
that property, then fair rent cannot exceed the standard rent. (The question of
considering actual rent does not arise. Consequently, no adjustment arises on account
of property remaining vacant or on account of unrealisable rent).
b) Municipal taxes actually paid can be claimed as deduction.
c) Both the deductions U/s.24 are available.
d) Interest can be claimed as deduction without out any ceiling limit.
(Teach Problem No.4 of Classroom discussion)
IV. NEITHER SELF OCCUPIED NOR LET OUT PROPERTY OR UNOCCUPIED PROPERTY: Same as (I) above***
V. PARTLY SELF OCCUPIED & PARTLY LET OUT OR PART OF YEAR S.O.& PART OF THE YEAR L.O.:
Case 1: House property - A portion let-out and a portion self-occupied:
a) That part of a property which is let out shall be computed separately under the ‘let out
property’ category and the other part which is self occupied shall be computed under the
‘self occupied property’ category (i.e. treatment shall be given as if there are 2 separate
properties).
b) Municipal valuation or F.R., if not given separately, shall be apportioned between the
let out portion & self-occupied portion either on plinth area or built-up floor space etc.
c) Similarly, where, in a building, the ground floor is let-out and the first floor is selfoccupied, income from the ground floor is to be computed as LOP and income from the
first floor is to be computed as SOP as if each such floor is an independent property.
d) Interest expenditure relating to the let out floor can be claimed fully and the interest
relating to the self-occupied floor can be allowed up to Rs. 30,000/ 2,00,000.
e) Property taxes if given on a consolidated basis can be bifurcated on a reasonable
basis like floor area or annual value.
f) The principle applicable to SOP equally applies to unoccupied property.
Case2: House property - let out for part of a year & self-occupied for part of a year:
a) If a single unit of property (house, flat or apartment) is self-occupied for few months
and let out for the other months then fair rent of the property for the whole year shall be
taken into account for determining the annual value (i.e. the period for which the
property is self- occupied shall also be taken as let out).
b) The fair rent for the whole year shall be compared with the actual rent and whichever is
higher shall be adopted as the annual value. In this case, the actual rent shall be the
rent for the period for which the property was let out during the previous year.
c) Even in such a case, property taxes and interest on loan for the whole year shall be
allowed as deduction.
(Teach problem No.5,6,7,8,9 &10 of Classroom discussion)
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8. TAX DEDUCTED AT SOURCE - SEC.25
According to Sec. 25, Interest on loan payable outside India shall not be allowed as deduction,
unless T.D.S. is made or tax is duly paid.
9. TAXABILITY OF RECOVERY OF UNREALISED RENT & ARREARS OF RENT RECEIVEDU/S 25A
(M12- 4M)
a) Unrealised Rent means the amount of rent received in arrears from a tenant or the
amount of unrealised rent realised subsequently from a tenant.
b) Unrealised rent is deducted from actual rent in determination of annual value U/S.23,
subject to fulfillment of conditions under Rule 4. Subsequently, when the amount is
realized, it gets taxed under section 25A (1) in the year of receipt.
c) If the assessee has increased the rent payable by the tenant and the same has been in
dispute and later on the assessee receives the increase in rent as arrears, such arrears is
assessable under section 25A(1)
d) As per new section 25A (1), the amount of rent received in arrears from a tenant or the
amount of unrealised rent realised subsequently from a tenant by an assessee shall be
deemed to be income from house property in the financial year in which such rent is
received or realised, and shall be included in the total income of the assessee under the
head “Income from house property”, whether the assessee is the owner of the property or
not in that financial year.
e) New section 25A (2) provides a deduction of 30% of arrears of rent or unrealised rent
realised subsequently by the assessee.
Summary of New Section 25A
Arrears of Rent / Unrealised Rent
i)
Taxable in the year of receipt/realisation
ii)
Deduction@30% of rent received/realised
iii)
Taxable even if assessee is not the owner of the property in the financial year of
receipt/realisation.
Tit Bit 10: Ms. Lena received Rs.30,000 as arrears of rent during the P.Y. 2017-18.How much
amount would be Taxable u/s.25A?
Tit Bit 11: Mrs. Vidya received Rs.90,000 in May, 2017 towards recovery of unrealised rent,
which was deducted from actual rent during the P.Y. 2016-17 for determining annual value.
How much amount would be Taxable u/s.25A?
Illustration 4: Mr. Anand sold his residential house property in March, 2017.
In June, 2017, he recovered rent of Rs. 10,000 from Mr. Gaurav, to whom he had let out his
house for two years from April 2010 to March 2012. He could not realise two months rent of
Rs. 20,000 from him and to that extent his actual rent was reduced while computing income
from house property for A.Y.2012-13.
Further, he had let out his property from April, 2012 to February, 2017 to Mr. Satish. In April,
2014, he had increased the rent from Rs. 12,000 to Rs. 15,000 per month and the same was a
subject matter of dispute. In September, 2017, the matter was finally settled and Mr.Anand
received Rs. 69,000 as arrears of rent for the period April 2014 to February, 2017.
Would the recovery of unrealised rent and arrears of rent be taxable in the hands of Mr.
Anand, if so in which year?
(RTP - M17)
CA Inter_39e_ Income Tax_Income from House Property ______________4.12
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
Solution
Since the unrealised rent was recovered in the P.Y.2017-18, the same would be taxable in the
A.Y.2018-19 under section 25A, irrespective of the fact that Mr. Anand was not the owner of
the house in that year. Further, the arrears of rent were also received in the P.Y.2017-18, and
hence the same would be taxable in the A.Y.2018-19 under section 25A, even though Mr.
Anand was not the owner of the house in that year. A deduction of 30% of unrealised rent
recovered and arrears of rent would be allowed while computing income from house property
of Mr. Anand for A.Y.2018-19.
Computation of income from house property of Mr. Anand for A.Y.2018-19
(i)
(ii)
Particulars
Unrealised rent recovered
Arrears of rent received
Rs.
10,000
69,000
79,000
23,700
55,300
Less: Deduction@30%
Income from house property
10. CO-OWNERSHIP - SEC.26
(FOR STUDENTS SELF STUDY)
a) Where the house property owned by the co-owners is self occupied by each of the coowner, the annual value of the property for each of such co-owner shall be nil and each of
the co-owner shall be entitled to the deduction of Rs. 30,000/2,00,000 under Sec.24 on
account of interest on borrowed money.
b) Where the property which is owned by co-owners is let out, the income from such property
or part thereof shall be first computed as if this property/part is owned by one owner and
thereafter the income so computed shall be apportioned amongst each co-owner as per
their share.
Tit Bit 12
Ganesh and Rajesh are co-owners of a self-occupied property. They own 50% share each.
The interest paid by each co-owner during the previous year on loan (taken for acquisition of
property during the year 2004) is Rs.2,05,000. What is the amount of allowable deduction in
respect of each co-owner?
(SM) (Ans.:Rs.2,00,000)
(Teach problem No.11,12 of Classroom discussion)
11. COMPOSITE RENT
The said composite rent can fall under 2 categories:
(FOR STUDENTS SELF STUDY)
1. Property + Facilities: Composite rent on account of rent for the property and service
charges for various facilities provided along with the house like lift, water, electricity, air
conditioning etc.
a) In this case such composite rent may be split up and the portion of rent attributable to the
house property shall be assessable as “Income from House Property”.
b) The other portion of the rent attributable for rendering services shall be assessable as
“Income from Other Sources”.
2. Property + Machinery: Composite rent on account of rent for the property and the hire
charges of machinery, furniture etc.
a) In this case if the letting of the property is separable from the letting of the other
assets, then the portion of the rent attributable to the letting of the premises shall be
assessable as “Income from House Property” and the other portion of the composite
rent attributable to the letting of the other assets shall be assessable either as “Profits
and Gains of Business or Profession” or “Income from Other Sources”.
CA Inter_39e_ Income Tax_Income from House Property ______________4.13
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b) If the letting of the property is inseparable from the letting of other assets like
machinery, furniture etc. the entire income would be taxable as “Profits and Gains of
Business or Profession” or Income from Other Sources”.
12. PROPERTIES WHICH ARE USED FOR AGRICULTURAL PURPOSES
(FOR STUDENTS SELF STUDY)
If the property is used for agricultural purposes, the annual value of such property would be
treated as “Agricultural Income” and it is exempt under section 10(1) of the Act. However, if
the house property is used for purpose other than agriculture the annual value of such
property cannot be treated as agricultural income.
PROFORMA OF COMPUTATION OF INCOME FROM HOUSE PROPERTY
Particulars
Computation of GAV
Step 1
Compute ER
ER = Higher of MV and FR, but restricted to SR
Step 2
Compute Actual rent received/receivable
Actual rent received/receivable less unrealized rent as per
Rule 4
Step 3
Compare ER and Actual rent received/receivable
Step 4
GAV is the higher of ER and Actual rent received/
receivable
Gross Annual Value (GAV)
Less:
Municipal taxes (paid by the owner during the previous
year)
Net Annual Value (NAV) = (A-B)
Less:
Deductions u/s 24
(a) 30% of NAV
D
(b) Interest on borrowed capital
(actual without any ceiling limit)
E
Amount
Income from house property (C-D-E)
A
B
C
F
PROBLEMS FOR CLASSROOM DISCUSSION
PROBLEM 1: (PRINTED SOLUTION AVAILABLE) Mr. Rahul Jadav furnishes the following
particulars relating to his house properties and other incomes and expenditure for the year 2017-18
i)
First house: this house is taken by him on lease for 10 years which is let to a tenant, for
his residence, at a monthly rent of Rs. 2,400.
He has incurred the following expenses during this year:
Lease rent
Rs. 1000 per month
Salary of Durban:
Rs. 200 per month
Interest on loan taken to pay for the acquisition of the lease
Rs. 200 per month
ii) Second house: This house was constructed by him in 1990, but was transferred to his
wife in 1995 out of love and affection. He, however, continues to stay in this house with his
wife till date, he has taken a loan for the construction of this house for which interest of
Rs.6000 becomes due for the year, but had not been paid by him. He has paid repair
expenses of Rs. 1000 during the year.
iii) Taxable income from business for this year amounts to Rs. 64000. Compute gross total
income of Mr. Rahul jadav for the assessment year 2018-19.
(Ans: Gross total income-70,000)
CA Inter_39e_ Income Tax_Income from House Property ______________4.14
No.1 for CA/CWA & MEC/CEC
MASTER MINDS
PROBLEM 2: R borrowed a sum of Rs.3,00,000 on 1-6-2009 on interest @ 12% p.a. to
construct house property in Delhi. As the house property was still under construction, he
borrowed another sum of Rs.2,00,000 on 1-4-2010 @ 12% p.a. The property was completed
on 31-8-2010 and it was self-occupied w.e.f. 1-9-2010. The fair rent of the house is Rs.10,000
p.m. R paid Rs. 2,000 as insurance premium for insuring the house property. Compute the
income under the head income from house property for the A.Y.2018-19.
(Ans.: Loan 1 – PCPI is 0 and Current year interest is 36,000 and Loan 2 – PCPI is 0 and current year
interest is 24,000. Total interest is 60,000 and IFHP = (60,000)).
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 3: (PRINTED SOLUTION AVAILABLE) Poorna has one house property at Indira
Nagar in Bangalore. She stays with her family in the house. The rent of similar property in the
neighbourhood is Rs 25,000 p.m. The municipal valuation is Rs. 23,000 p.m. Municipal taxes
paid is Rs. 8,000. The house was constructed in the year 2011 with a loan of Rs. 20,00,000
taken from SBI Housing Finance Ltd. The construction was completed on 30.11.2013. The
accumulated interest up to 31.3.2013 is Rs. 1,50,000. During the previous year 2017-18,
Poorna paid Rs. 2,40,000 which included Rs. 1,80,000 as interest. Compute Poorna’s income
from house property for A.Y. 2018-19.
(SM) (Ans: IFHP = (2,00,000))
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 4: Ganesh has two houses, both of which are self-occupied. The particulars of the
houses for the P.Y. 2017-18 are as under.
Particulars
Municipal valuation p.a.
Fair rent p.a.
Standard rent p.a.
Date of completion
Municipal taxes paid during the year
Interest on money borrowed for repair of property during
the current year
House I
1,00,000
75,000
90,000
31-3-1999
12%
-
House II
1,50,000
1,75,000
1,60,000
31-3-2001
8%
55,000
Compute Ganesh’s income from house property for A.Y. 2018-19 and suggest which house
should be opted by Ganesh to be assessed as self-occupied so that his tax liability is
minimum.
(Ans.: Option 1- house 1 is SOP IFHP = 0, House 2 is DLOP IFHP =48600 and Option 2 – House 1 is DLOP
IFHP = 54600 , House 2 is SOP IFHP = (30,000). IFHP in option 2(24600) is low when compared to option 1
(48600) i.e. House 1 = DLOP and House 2 = SOP)
(SM) (Solve problem No.1 of Assignment problem as rework)
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 5: (PRINTED SOLUTION AVAILABLE) Ganesh has a property whose municipal
valuation is Rs.2,50,000 p.a. The fair rent is Rs.2,00,000 p.a. and the standard rent fixed by
the Rent Control Act is Rs.2,10,000 p.a. The property was let out for a rent of Rs.20,000 p.m.
However, the tenant vacated the property on 31.1.2018. Unrealised rent was Rs.20,000 and
all conditions prescribed by Rule 4 are satisfied.
He paid municipal taxes @8% of municipal valuation. Interest on borrowed capital was
Rs.65,000 for the year. Compute the income from house property of Ganesh for A.Y.2018-19.
(SM) (Ans.: IFHP = 47,000)
Note:______________________________________________________________________
___________________________________________________________________________
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PROBLEM 6: (PRINTED SOLUTION AVAILABLE) Smt. Rajyalakshmi owns a house property
at Adyar in Chennai. The municipal value of the property is Rs. 5,00,000, fair rent is Rs.
4,20,000 and standard rent is Rs. 4,80,000. The property was let-out for Rs. 50,000 p.m. up to
December 2017. Thereafter, the tenant vacated the property and Smt. Rajyalakshmi used the
house for self-occupation. Rent of the months of November and December 2017 could not be
realized in spite of the owner’s efforts. All the conditions prescribed under rule 4 are satisfied.
She paid municipal taxes @ 12% during the year. She had paid interest of Rs. 25,000 during the
year for amount borrowed for repairs for the house property. Compute her income from house
property for the A.Y. 2018-19.
(SM)
(Ans.: GAV = 4, 80,000, Interest on Loan = 25,000 and IFHP = 2,69,000)
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 7: R has a house property situated in Delhi which consists of two units. Unit A has
60% floor area, where as Unit B has 40% floor area. Unit A was self occupied by R for 8
months and w.e.f. 1-12-2017, it was let out for Rs.10,000 p.m. Unit B was also meant for selfoccupation but it was also let out w.e.f.1-10-2017 for Rs.8,000 p.m. Other particulars:
Municipal taxes paid
Insurance premium
Interest on money borrowed
40,000
4,000
20,000
Compute income from house property for the assessment year 2018-19.
(Ans: Unit A - GAV = 1,20,000, interest on loan = 12,000 and IFHP = 55,200 and Unit B – GAV = 96,000,
interest on loan = 8,000 and IFHP = 48,000 )
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 8: (PRINTED SOLUTION AVAILABLE) Mr. Vikas owns a house property whose
Municipal Value, Fair Rent and Standard Rent are Rs. 96,000, Rs. 1,26,000 and Rs. 1,08,000
(per annum), respectively. During the Financial Year 2017-18, one-third of the portion of the
house was let out for residential purpose at a monthly rent of Rs. 5,000. The remaining twothird portion was self occupied by him. Municipal tax @ 11 % of municipal value was paid
during the year. The construction of the house began in June, 2010 and was completed on 315-2013. Vikas took a loan of Rs. 1,00,000 on 1-7-2010 for the construction of building. He paid
interest on loan @ 12% per annum and every month such interest was paid.
Compute income from house property of Mr. Vikas for the Assessment Year 2018-19.
(MTP-M17)(SM)(Ans. IFHP 20,936)
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 9: Mr. X owns a house in Delhi. During the previous year 2017-2018, 3/4th portion
of the house was self-occupied for full year and 1/4th portion was let out for residential
purposes from 1-4-2017 to 31-12-2017 on a rent of Rs.700 p.m. From 1-1-2018 this portion
was also used for own residence. Municipal valuation of the house is Rs.20,000. He incurred
the following expenditure in respect of the house property: Municipal taxes due Rs.6,000;
Repairs Rs.2,000; Insurance Premium Rs.3,500; Land Revenue Rs.4,000; Ground Rent
Rs.200 were paid during the year. A loan of Rs.60,000 was taken on 1-4-2010@ 15% p.a. for
the construction of the house which was completed on 28-3-2011. Nothing was repaid so far.
Find out house property income for the A.Y.18-19.
th
(Ans: ¾ portion – NAV = 0, Interest on loan = 6,750 and IFHP = (6,750) and remaining ¼ portion- GAV =
8,400 , interest on loan is 2,250 and IFHP = 3,630. Total IFHP = (3,120))
(Solve problem No.2 of Assignment problem as rework)
Note:______________________________________________________________________
___________________________________________________________________________
CA Inter_39e_ Income Tax_Income from House Property ______________4.16
MASTER MINDS
No.1 for CA/CWA & MEC/CEC
PROBLEM 10: (PRINTED SOLUTION AVAILABLE) Mr. Krishna owns a residential house in
Delhi. The house is having two identical units. First unit of the house is self-occupied by Mr.
Krishna and another unit is rented for Rs. 12,000 p.m. The rented unit was vacant for three
months during the year. The particulars of the house for the previous year 2017-18 are as
under:
Standard Rent
Rs. 2,20,000 p.a.
Municipal Valuation
Rs. 2,44,000 p.a.
Fair Rent
Rs. 2,35,000 p.a.
Municipal tax paid by Mr. Krishna
12% of the Municipal Valuation
Light and water charges
Rs. 800 p.m.
Interest on borrowed capital
Rs. 2,000 p.m.
Insurance charges
Rs. 3,500 p.a.
Painting expenses
Rs. 16,000 p.a.
Compute income from house property of Mr. Krishna for the A.Y.2018-19
(SM, N13 - 8M) (Ans. IFHP 41,352)
(Solve problem No.3 of Assignment problem as rework)
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 11:(PRINTED SOLUTION AVAILABLE) Two brothers Arun and Bimal are coowners of a house property with equal share. The property was constructed during the
financial year 1998-1999. The property consists of eight identical units and is situated at
Cochin.
During the financial year 2017-18, each co-owner occupied one unit for residence and the
balance of six units were let out at a rent of Rs. 12,000 per month per unit. The municipal
value of the house property is Rs. 9,00,000 and the municipal taxes are 20% of municipal
value, which were paid during the year. The other expenses were as follows:
Rs.
i)
Repairs
40,000
ii) Insurance premium (paid)
15,000
iii) Interest payable on loan taken for construction of house
3,00,000
One of the let out units remained vacant for four months during the year.
Arun could not occupy his unit for six months as he was transferred to Chennai. He does not
own any other house.
The other income of Mr. Arun and Mr. Bimal are Rs. 2,90,000 and Rs. 1,80,000 respectively,
for the financial year 2017-18.
Compute the income under the head ‘Income from House Property’ and the total income of
two brothers for the assessment year 2018-19.
(Ans.: Income from let out portion = 2, 51,700, Total income of MR. Arun = 3,85,850, Total income of Mr.
Bimal is 2,75,850.)
(SM)(MTP-MAR15)Solve problem No.4 of Assignment problem as rework)
Note:______________________________________________________________________
___________________________________________________________________________
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CA Inter_39e_ Income Tax_Income from House Property ______________4.17
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PROBLEM 12: (PRINTED SOLUTION AVAILABLE) Mr. A and Mr. B constructed their house
on a piece of land purchased by them at New Delhi. The built up area of property was 1,000
sq.ft. ground floor and an equal area in the first floor. Mr. A stared construction on 1.04.2016
and completed on 31.03.2017. Mr. B started the construction on 1.04.2016 and completed the
construction on 30.06.2017. Mr. A occupied the entire house on 01.04.2017. Mr. B occupied
the Ground Floor on 01.07.2017 and let out the first floor for a rent of Rs.15,000 per month.
However, the tenant vacated the house on 31.12.2017 and Mr.B occupied the entire house
during the period 01.01.2018 to 31.03.2018.
Fair rental value of each unit (Ground floor/first floor)
Municipal value of each unit (Ground floor/first floor)
Municipal taxes paid by A
Municipal taxes paid by B
Repairs & Maintenance charges paid by A
Repairs & Maintenance charges paid by B
1,00,000p.a
72,000p.a
8,000
8,000
28,000
30,000
Mr. A has availed a housing loan of Rs.20 Lakhs @ 12% p.a. on 01.04.2016. Mr. B has
availed a housing loan of Rs.12 Lakhs @ 10% p.a. on 01.07.2016. No repayment was made
either of them till 31.03.2018. Compute income from house property for Mr. A and Mr. B.
(Ans.: Mr.A-(2,00,000), Mr.B-(77,800))
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 13: (PRINTED SOLUTION AVAILABLE) Mrs. Rohini Ravi, a citizen of the U.S.A.,
is a resident and ordinarily resident in India during the financial year 2017-18. She owns a
house property at Los Angeles, U.S.A., which is used as her residence. The annual value of
the house is $20,000. The value of one USD ($) may be taken as Rs. 60. She took ownership
and possession of a flat in Chennai on 1.7.2017, which is used for self occupation, while she is
in India. The flat was used by her for 7 months only during the year ended 31.3.2018. The
municipal valuation is Rs. 32,000 p.m. and the fair rent is Rs. 4,20,000 p.a. She paid the
following to Corporation of Chennai:
Property Tax
Sewerage Tax
Rs. 16,200
Rs. 1,800
She had taken a loan from Standard Chartered Bank for purchasing this flat. Interest on loan
was as under:
Period prior to 1.4.2017
1.4.2017 to 30.6.2017
1.7.2017 to 31.3.2018
Rs.
49,200
50,800
1,31,300
She had a house property in Bangalore, which was sold in March, 2014. In respect of this
house, she received arrears of rent of Rs. 60,000 in March, 2018. This amount has not been
charged to tax earlier.
Compute the income chargeable from house property of Mrs. Rohini Ravi for the assessment
year 2018-19, exercising the most beneficial option available.
(PM)(Ans. IFHP 57,960)
(Solve problem No.5 of Assignment problem as rework)
Note:______________________________________________________________________
___________________________________________________________________________
PROBLEM 14: (PRINTED SOLUTION AVAILABLE) Mr. Raphael constructed a shopping
complex. He had taken a loan of Rs.25 lakhs for construction of the said property on 01-082014 from SBI @ 10% for 5 years. The construction was completed on 30-06-2015. Rental
income received from shopping complex Rs.30,000 per month-let out for the whole year.
Municipal taxes paid for shopping complex Rs.8,000.
CA Inter_39e_ Income Tax_Income from House Property ______________4.18
MASTER MINDS
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Arrears of rent received from shopping complex Rs.1,20,000
Interest paid on loan taken from SBI for purchase of house for use as own residence for the
period 2017-2018, Rs.3 lakhs.
You are required to compute income from house property of Mr. Raphael for AY 2018-2019 as
per Income-tax Act, 1961.
(M17- 5M)(Ans. IFHP- (1,52,933))
Note:______________________________________________________________________
___________________________________________________________________________
ASSIGNMENT PROBLEMS
PROBLEM 1:Nisha has two houses, both of which are self-occupied. The particulars of these
are given below:
(M 14 - 8M)
(Value in Rs.)
Particulars
House - I
House – II
Municipal Valuation per annum
1,20,000
1,15,000
Fair Rent per annum
1,75,000
Standard rent per annum
1,00,000
1,65,000
31-03-1999
31-03-2001
Municipal taxes payable during the year (paid for House II only)
12%
8%
Interest on money borrowed for repair of property during
current year
-
55,000
Date of completion
Compute Nisha's income from house property for the Assessment Year 2018-19 and suggest
which house should be opted by Nisha to be assessed as self-occupied so that her tax liability
is minimum.
(SM, RTP - N17,M16, MTP - N16)
(Ans.: Option 1- house 1 is SOP IFHP = 0, House 2 is DLOP IFHP = 54,060 and Option 2 – House 1 is DLOP
IFHP = 70,000 , House 2 is SOP IFHP = (30,000). IFHP in option 2 is more beneficial Nisha should opt to treat
House - II as Self occupied and House I as Deemed to be let out, in which case, her income from house
property would be Rs. 40,000 for the A.Y. 2017-18.)
PROBLEM 2:Prem owns a house in Madras. During the previous year 2017-18, 2/3rd portion
of the house was self-occupied and 1/3rd portion was let out for residential purposes at a rent
of Rs. 8,000 p.m. Municipal value of the property is Rs. 3,00,000 p.a. fair rent is Rs. 2,70,000
p.a. and standard rent is Rs. 3,30,000. He paid municipal taxes @ 10% of municipal value
during the year. A loan of Rs, 25,00,000 was taken by him during the year 2010 for acquiring
the property. Interest on loan paid during the previous year 2017-18 was Rs. 1,20,000.
Compute Prem’s income from house property for the A.Y. 2018-19.
(SM)
(Ans.: IFHP for SOP = (80,000) , IFHP for LOP = 23,000 and Total IFHP = (57,000))
PROBLEM 3: Mr. X owns one residential house in Mumbai. The house is having two identical
units. First unit of the house is self occupied by Mr. X and another unit is rented for Rs. 8,000
p.m. The rented unit was vacant for 2 months during the year. The particulars of the house for
the previous year 2017-18 are as under:
Particulars
Standard rent
Municipal valuation
Fair rent
Municipal tax (Paid by Mr. X)
Light and water charges
Interest on borrowed capital
Lease money
Rs.
1,62,000 p.a.
1,90,000 p.a.
1,85,000 p. a
15% of municipal
valuation
500 p.m.
1,500 p.m.
1,200 p.a.
CA Inter_39e_ Income Tax_Income from House Property ______________4.19
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Insurance charges
Repairs
3,000 p.a.
12,000 p.a.
Compute income from house property of Mr. X for the A.Y. 2018-19.
(SM, N08 - 6M)(Ans. IFHP 28,025)
PROBLEM 4:Mr. Raman is a co-owner of a house property along with his brother holding
equal share in the property.(N09-6M)
Particulars
Municipal value of the property
Fair rent
Standard rent under the Rent Control Act
Rent received
Rs.
1,60,000
1,50,000
1,70,000
15,000 p.m.
The loan for the construction of this property is jointly taken and the interest charged by the
bank is Rs. 25,000, out of which Rs. 21,000 has been paid. Interest on the unpaid interest is
Rs. 450. To repay this loan, Raman and his brother have taken a fresh loan and interest
charged on this loan is Rs. 5,000.
The municipal taxes of Rs. 5,100 have been paid by the tenant.
Compute the income from this property chargeable in the hands of Mr. Raman for the A.Y.
2018-19.
(SM)(Ans.: IFHP – Rs.48,000)
PROBLEM 5: Mrs. Indu, a resident individual, owns a house in U.S.A. She receives rent @ $
2,000 per month. She paid municipal taxes of $ 1,500 during the financial year 2017-18. She
also owns a two storied house in Mumbai, ground floor is used for her residence and first floor
is let out at a monthly rent of Rs. 10,000. Standard rent for each floor is Rs. 11,000 per month
and fair rent is Rs. 10,000 per month. Municipal taxes paid for the house amounts to Rs.
7,500. Mrs. Indu had constructed the house by taking a loan from a nationalized bank on 20-62010. She repaid the loan of Rs. 54,000 including interest of Rs. 24,000. The value of one
dollar is to be taken as Rs. 60. Compute total income from house property of Mrs. Indu.
(RTP N - 16 )(Ans.10,02,375)
LIST OF IMPORTANTCONCEPTS(APPLICABLE FOR WEEKEND EXAMS ONLY BUT NOT FOR ANY OTHER EXAMS)
1, 3, 4, 5, 6, 7, 9, 11, 12
ADVANCED CONCEPTS FOR STUDENTS SELF STUDY
1. TAXATION OF INCOME FROM PROPERTIES SITUATED OUTSIDE INDIA
A resident assesse is taxable under section 22 in respect of annual value of a houseProperty
situated in foreign country. A resident but not ordinarily resident or a non-resident is taxable in
respect of income from such property if the income is received in India during the previous
year. Once incidence of tax is attracted under section 22, theAnnual value will be computed as
if the property is situated in India.
The municipal taxes paid outside India shall be deductible from the gross annual value of the
house property if such taxes have been actually paid by the assesseeduring the previous year.
(N 10-4M)
2. DISPUTED OWNERSHIP
If the title of ownership of the house property is under dispute in a court of law, the decision
about who is the owner lies with the Income tax Department. The assessment cannot be help up
for such dispute. Generally, a person who receives the income or who enjoys the possession of
the house property as owner, though his claim is under dispute, is assessable to tax under
section 22.
(N10 - 4M)
CA Inter_39e_ Income Tax_Income from House Property ______________4.20
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No.1 for CA/CWA & MEC/CEC
3. PROPERTY OWNED BY A PARTNERSHIP FIRM
a) Where an immovable property or properties is included in the assets of a firm, the income
from such property should be assessed in the hands of the firm only.
Hence, the property income cannot be assessed as income of the individual partner in
respect of his share in the firm.
TEST YOUR KNOWLEDGE
Q.No.1. Give the proper head of income under which the following would be chargeable:
a) A Ltd., a trading company, constructed residential flats and let them to its employees, at a
nominal rent deductible from their salaries.
b) The assessee makes part of its business premises available to the Government for
locating a branch of a bank, post office, etc in order to carry on its business smoothly.
Q.No.2. Under Sec.4, an association of persons is also one of the entities on which tax shall
be charged in respect of the previous year on the income. There is an exception to this rule.
What is the exception?
Q.No.3. Discuss the following issues relating to Income from House Property:
a) Income earned by residents from house properties situated in foreign countries. If
Municipal Taxes are paid in that country is it allowed in India under I. T Act, 1961.
b) Properties which are used for agricultural purposes.
Q.No.4. A property was acquired with borrowed money. The owner of the property raised a
secured loan to repay the first loan and claimed the interest paid on the secured loan as a
deduction from income. Is the claim admissible?
Q.No.5. Mr. X constructs a house property consisting of 13 rooms apart from a residential
portion in which he resides. The rooms are well furnished and are let-out to employees of a
company who are paying guests. X provides them lunch and dinner. The rental income
comprises of room rent and charges for lunch and dinner but separation of rental income and
charges for dinner and lunch could not be made. Is the income chargeable under income from
house properties u/s.22 or income from business u/s.28?
Q.No.6. The assessee, who was deriving income from “House property”, realized a sum of
Rs.52,000 on account of display of advertisement hoardings of various concerns on the roof of
the building. He claims that this amount should be considered under the head “House
property” and not under “Other sources”.
Q.No.7. ’X' Ltd. company is engaged in the business of letting out of property on rent and has
that activity as its main object. It is contended that since House letting is done as a profitability
activity the income there from is chargeable as business income and the company wants to
claim depreciation. Is the Company correct?
LIST OF IMPORTANT CONCEPTS : 1, 3, 4, 6, 9, 11, 12.
LIST OF IMPORTANT CLASSROOM DISCUSSION PROBLEMS: 1, 2, 6, 9, 11, 12, 13, 14.
LIST OF IMPORTANT ASSIGNMENT PROBLEMS: 4, 5.
CA Inter_39e_ Income Tax_Income from House Property ______________4.21
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SIGNIFICANCE OF EACH PROBLEM COVERED IN THIS MATERIAL
Problem No.
Problem No. Problem No. Problem No. in
Previous
in this
RTP
MTP
in new SM
in old SM
old PM
Exams
material
CR 1
CR 2
CR 3
ILL 5
ILL 6
CR 4
ILL 7
ILL 8
CR 5
ILL 4
ILL 5
CR 6
ILL 6
ILL 7
CR 7
CR 8
PQ 3
PQ 7
M17 - 1
CR 9
CR 10
TYQ 11
PQ 4
N13 -8M
CR 11
PQ 5
PQ 2
CR 12
PQ 6
CR 13
PQ 4
PQ 5
CR 14
PQ 11
M17- 5M
ASG 1
TYQ 12
PQ 10
N17 N16 - 1
M16
ASG 2
ILL 8
ILL 9
N15
ASG 3
PQ 2
PQ 8
N08 - 6M
ASG 4
PQ 1
PQ 3
N16 - 2
ASG 5
N16
-
Remarks
THE END
CA Inter_39e_ Income Tax_Income from House Property ______________4.22